SIA Engineering Company Ltd’s Latest Earnings: What Investors Need to Know

SIA Engineering Company Ltd (SGX: S59) is an aircraft maintenance, repair and overhaul firm. On Friday, the firm announced its third-quarter earnings. The reporting period was from 1 October 2017 to 31 December 2017.

Here’s a quick rundown of the financial figures from the latest quarter:

1) Revenue came in at S$271 million, down 0.5% year-on-year. The fall was due to a decrease in fleet management revenue, which was slightly offset by an increase in line maintenance revenue.

2) Operating profit fell 27.8% to S$18.2 million primarily on the back of foreign exchange loss incurred during the quarter as compared to an exchange gain in the corresponding quarter last year.

3) Share of profits from associated and joint venture companies, net of tax, improved by 29.1% to S$40.8 million. This was mainly due to higher contributions from repair and overhaul centres.

4) As a result, net profit rose from S$52.6 million to S$54.8 million, an increase of 4.2% year-on-year.

5) Basic earnings per share for the quarter grew 4.5% to 4.9 Singapore cents.

6) As at 31 December 2017, SIA Engineering’s cash balance stood at S$449.6 million, with S$25.2 million in total debt. This translates to a net debt position of S$424.4 million, a deterioration from S$575.8 million in net cash that it had on 31 March 2017.

7) Cash flow from operations was S$12.6 million and S$7.9 million was spent on capital expenditure. Therefore, the engineering outfit brought in S$4.7 million in free cash flow for the latest quarter, a huge decline from S$49.6 million raked in a year ago.

For the nine months ended 31 December 2017, revenue grew 1.2% year-on-year to S$818.5 million, but net profit tumbled 54.9% to S$129.1 million. The huge fall in the bottom line was due to a one-off gain from the divestment of SIA Engineering’s 10% stake in Hong Kong Aero Engine Services Ltd. Excluding the impact of the divestment, net profit would have grown 2.4%.

Once again, the engineering firm’s associated and joint venture companies have helped to significantly improve its earnings. In the previous quarter, share of profits of associated and joint venture companies, net of tax, soared 33.1% year-on-year to S$22.9 million.

Looking ahead, SIA Engineering said that the business environment remains challenging due to keen competition in the region and entry of new-generation aircraft that require lighter maintenance.

It added:

“To overcome the challenges, the Company has been investing in innovation and technology to improve our capabilities and sharpen our competitive edge. We have developed a roadmap to review all our business processes, organisation structure and services to identify transformative initiatives to better serve our customers and improve our performance.

We continue to engage with our joint venture partners, and seek new partnerships, to seize opportunities that come with the disruptions in the MRO industry.”

SIA Engineering shares are now changing hands at S$3.30. This translates to a trailing price-to-earnings ratio of around 21 and a trailing dividend yield of close to 4%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.